9 things to know before raising funds for your startup

The start-up ecosystem in India is scaling new heights. An estimated 10,000 crore start-up fund for new businesses has been allotted in the Union Budget this year. Last few weeks have also been buzzing with funding news – with Capillary Technologies, Urban Ladder, Ola Cabs and others raising capital. A much talked about topic – startup funding – was also the theme of Headstart‘s July edition of ‘Startup Saturday’. The event started with Phanindra Sama, Co-founder of Redbus, talking on the ways of building a fundable company, and Amritanshu Anand, Co-founder of BetaGlide, highlighting various unconventional routes to funding. This topic was explicitly discussed further by the panellists: Manish Singhal, Let’s Venture; Naveen Rungta, Elagaan; Sanjiv Kathuria, TNT; Phanindra Sama, Redbus; Anand Daniel, Accel Partners; and Ravi Trivedi, CouponRani, and the panel was moderated by Harsimran Julka of ‘The Economic Times’.

Here are some key highlights of the panel discussion for start-ups:

Never have more than 3 founders

Too many cooks spoil the broth. Having 2-3 founders is an ideal choice. In case you need more experts, you can always hire them. In rare cases more than 3 founders stick together; if the number is more, ultimately, it boils down to 2 or 3.

Having one founder is also a bad option. Having different perspectives and divided risks is always a favourable position to be in.

Analyse the market; idea may be good but the market may not be ready

It is primarily important to interpret the existing market scenario in terms of your idea. Broadcasting your idea at the right time is where most of the startups fail.

Therefore, first analyse the market and then take a call. If needed keep patience and wait for the market to develop according to your perspective.

Pick the right mentors

Having the right mentors to guide you and help you manage risk is a blessing in disguise. Even though there are no hard-and-fast rules of choosing a mentor, make sure that your frequency and belief matches. A mentor should believe in your idea and ambition, as a result, making your journey easy and a learning experience.

Maintain your accounts

A list of expenses of the previous and the upcoming months should always be maintained. This helps you keep track of where the money is going and how much money will be needed. As a result, while going to an investor, you can always show them the accounts and logistically present the amount of funds required.

Ensure financial stability in your personal life

Giving up an existing job to start a venture is quite a challenging task. Knowing well that the risk may or may not bear fruit, it is of utmost importance to ensure that all the debts are cleared. Also, make sure that the medical insurance, family savings and credit cards are in place. Alongside, keep a minimum runway of 9-12 months. Once all the basic things are taken care of, it will become easier for the risk taker to concentrate on his venture.

Family money

Keeping personal reputation at stake is riskier. Considering that most startups fail, ideally, family money should not be more that 5-10% of the total investment.

Consider funds as bonus

Planning a startup on the basis of bootstrapping is considered to be an ideal one. This helps you concentrate on your business completely rather than hunting for an investor. Also, this will help you control the company completely without any pressure from outside investors.

Go to 3-4 investors see what they are asking for

Meeting an investor can be a learning experience. Listen to all the questions he asks for after you give your presentation and make a note. Remember, those are the areas the investor is not comfortable with.

The more you meet investors, the more you will be able to understand the loop holes in your venture.

When a startup does not work, it is good to accept it

The bitter truth is that approximately 80-90% of start-ups fail. It is good to make your call and move on if things don’t fall into place. Of course, this should be the last resort but as a risk taker, remember that at times you need to let things go.

Do you have any tips you would like to share? Let us know in comments below